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Fellow -> RE: Austerity: Common Sense or Bad Public Policy? (10/25/2010 12:32:28 PM)
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I think the last sentence of the article tells all:
"There are many contradictions in these arguments," says Blyth, "and they're born of a sense of frustration out of what I think is the intuitive understanding people have that something deeply unfair is going on."
Austerity advocates assume the US economy is generally sound except excessive debt load that can be eliminated if little people work harder. It should be clear this is simply impossible considering the amount of debt and destroyed job market. The austerity will result in prolonged depressed economy. The opposite policy (deficit spending) would lead to reduction of debt via destruction of the dollar. It would eventually write down the debt destroying and redistributing lot of wealth along it. Obviously, the super-rich who have lot of control over the economy, want austerity as it would preserve their wealth without any effort while the poor would take the hit. Deficit spending drags the poor along for a while followed by a crash.
The government has tools to substantially direct the process. I think, the path that would bring economic growth, would be a major structural change in the economy especially in the financial sector (I mean breaking up big banks, writing down a majority of debt, passing real financial reform). I do not expect it to happen though.
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